Lethal Mistake #1: Not Having an Effective Fundraising Plan (Part 1)

Why you need a fundraising plan

Before you start any project you need to develop a plan… and if you’re in charge of raising money for a nonprofit organization that plan is critically important because you don’t have excess funds to correct mistakes, do costly revisions or provide for contingencies that could sink, delay or render your entire campaign ineffective.

Here’s how to avoid all those costly and time consuming mistakes that result in raising less money while making you feel more frustrated:

SETTING GOALS

Before discussing how much money you intend to raise it’s imperative you first define the program, why you believe it’s important, its purpose and the people it will help. Once you know this, it is easier to determine the cost of the program and then add your fundraising costs and a contingency factor to arrive at the final amount you need to raise.

Projects may be idealistic but your goals need to be realistic

You must be very specific with the description of the project, its benefit to the organization and community, the number of people it will help, its cost and the timeframe for completion.

Setting your fundraising goal is where your fundraising campaign begins but sadly, many worthwhile fundraising campaigns are doomed before they even get to the starting line because the fundraisers failed to question the reliability of the information that was given to them as to cost, sources of funds, timeframes and contingencies. When this happens, the campaign may achieve its stated goal but that goal was too low to adequately meet the needs of the entire project.

My advice is that you must question everything and also question the reliability of the sources of the information. Don’t assume that because the people who give you information are honest, that they are also knowledgeable about the information they provide.

Example: A church wants to build a new building for bible studies. A long-time and trusted member of the congregation is a building contractor who agrees to do the job and submits a proposal that is 10% less than any of the other bids the church received. So far, so good but, what if:

*The contractor’s estimates are wrong?

*There are delays in the project caused by severe weather conditions?

*Unexpected shortages in materials result in higher prices than planned?

*Problems arise with one or more key individuals concerning health, accidents or even death?

*Legal or environmental concerns cause unplanned delays and costs?

The list could be endless and it’s highly unlikely that all will occur but what if a few do? So be sure to include a sufficient contingency based on the project, its complexity, the experience of the people involved and other factors that could affect its cost or timing.

If you’re doing a simple online appeal and seek only small donations, you’re not likely to have to justify any of your expenses but if some of your donors could make a substantial contribution they would rightfully demand to know how you arrived at the numbers and how their money will be spent. So do your homework, be prepared and you won’t be embarrassed or jeopardize the opportunity to raise large amounts of money from people you may not have anticipated to be that supportive of the project.

One last, but important item you should never overlook. Make sure your plan is developed with and agreed to by your board of directors. It’s always critical that the entire team is moving in the same direction plus, with everyone in agreement, it’s easier to get the board’s active involvement thus providing additional support and commitment to the success of the project.

CREATING A BUDGET

After you determine how much money your project will need, you then must let your donors know why you need it and how your organization is planning to spend the money. And don’t forget your donors deserve to know what your total operating budget is and what percent of the amount raised it represents.

You will also need this information for legal and bookkeeping reasons to determine how successful you were compared to the original plan and, in a few but very lucky situations, what you plan to do with the excess funds raised.

Make sure you account for and justify every expense

Include costs such as postage, building and maintaining your website, staffing requirements and expenses and be sure to include all costs associated with managing volunteers. Just because volunteers don’t get paid, doesn’t mean there are no associated costs.

A word of caution

Whether you run a department for a for profit company or a fundraising campaign for a nonprofit organization, it is basic human nature to underestimate your costs and overestimate your projected revenue. If you learn nothing else from this Guide, do the opposite. Be conservative when estimating costs. Always use simple and efficient methods so that your costs don’t become excessive in relationship to the money raised.

Most professionals recommend that administrative costs should not exceed 25 percent of your overall operating budget. However, this will vary by project, organization and the experience and expertise of the fundraising team. Personally, I would target total expenses not to exceed 15%. This sends a clear message to your donors that you respect their money and you know how to run a campaign effectively and efficiently. This will make your job a lot easier when you approach them for your next project… and there will always be a next project.

Ready for part II of ‘Lethal Mistake #1 Not having an effective fundraising plan?’ Click here to read more!